Allendale Livestock Wrap-Up for 12/30/2009
Hogs: The good news is the pork industry is in liquidation. The total breeding herd went from 3.1% smaller than previous year levels down to 3.5% smaller on Dec. 1. That was very close to the average guess. The bad news is due to better than expected efficiency gains it is not very much liquidation. An example is this the Dec. 1 breeding herd, at 3.5% smaller than last year, will give birth to 2.9% fewer litters from December through February. The 2009 pigs per litter gain was 2.1% over last year. We are being conservative, perhaps too much so, and assuming the 2010 pigs per litter pace will cool down to only a 1% increase. That means, from 3.5% fewer breeding animals, you only see a 1% to 2% smaller pig crop. The bottom line is we project slaughter from U.S. born animals in 2010 to be only 0.9% smaller than 2009. We are projecting slaughter in the United States from Canadian imported hogs to fall 14%. That puts the total kill in the United States to be down 1.7%. We are assuming weights in 2010 will equal 2009 levels as we must project a normal weather year (2009 weather and weight gains were phenomena).
Cattle: The good news is cash cattle traded for $84 in Kansas and Oklahoma and $85 to $85.50 in Texas. This is quite a bit more than expected. Last week traded $82 and $83 in those areas respectively. While it sounds good we still cannot say safely that retailers and packers are reaching out with better demand hopes right now. Heck, after two days of higher beef prices we see this afternoon’s boxed beef report lower. We like the recent better trade, due to the two storms in the northern plains this month, but cannot say beef demand (the big picture price mover right now) is improving. We are still neutral to prices right now.
Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com